UNIT 3
Probability & Expected Value
A decision can be good before the outcome and still lose once.
Forecast55%Not certain
The weighted average payoff across many possible outcomes.
- Comparing strategies
- Calibrating confidence
- Inputs may be wrong
- Expected value says nothing about path survival
Equating a winning outcome with a good decision.
Forecast quality is commonly evaluated with proper scoring rules and calibration, not accuracy alone.
60-SECOND CHEAT SHEET
Remember this.
- 1EV = Σ(probability × payoff)
- 2Win rate needs payoff
- 3Confidence should match evidence